Breakthrough in Illinois' $96B pension crisis?

By JOHN O'CONNOR | January 4, 2013 | 9:32 PM EST

SPRINGFIELD, Ill. (AP) — The prospects for solving Illinois' worst-in-the-nation pension crisis may have grown brighter Friday when powerful House Speaker Michael Madigan said he was open to deferring a contentious teacher retirement issue that has deadlocked lawmakers for almost a year.

Madigan's shift was announced by Gov. Pat Quinn, who is pushing to solve the $96 billion pension problem during a lame-duck legislative session that ends next week. The governor characterized the news as a breakthrough.

But many other pension issues remain unsettled. And whether Madigan's decision, which was confirmed by his spokesman, will lead to a true path through the impasse was far from certain.

Quinn said he would meet with legislative leaders Saturday in an effort to fashion a deal to be voted on in the General Assembly next week. He set a Jan. 9 deadline, the same day the current legislature ends and a new one is sworn in.

The Democratic governor said the talks will now exclude discussion about forcing local school districts to pay a portion of their employees' costs. That is a traditional state expense that Madigan, also a Democrat, and others had proposed shifting back to the districts — but Republicans balked, fearing it would force communities outside Chicago to raise taxes or drastically cut programs.

This year, the cost to the state was $650 million from general state funds paid on behalf of current and former elementary and secondary teachers.

Overall, Illinois' pension deficit has been growing by $17 million per day, threatening to eat up more and more money for education and other public services. It's also costing taxpayers millions more because of the state's low credit rating.

Quinn said Madigan had told him by telephone that he would agree to defer the school pensions issue if it might allow lawmakers to pass some kind of pension reform in the near term.

"That's a major ... step forward for all of us," Quinn said. "We would still keep working on that issue, we'd pay attention to that issue, but it was of such paramount importance that we act now, to begin the process of pension reform, that (Madigan) was willing to take that particular issue off the table."

"What the speaker told the governor is we've got to pass a pension bill," Brown said. "If setting aside the cost shift for now means (the legislature) passing other things, let's pass other things."

Others were more cautious about the news. A spokeswoman said Democratic Senate President John Cullerton of Chicago wants lawmakers to pass a more modest alternative that the Senate adopted last spring. It affects only a portion of the workers and retirees but would be a starting point, and Cullerton is concerned that more ambitious efforts could be unconstitutional.

A coalition of union representatives warned against a "headlong rush" to forge a solution. The We Are One Illinois coalition of unions opposes plans that cut benefits that workers have earned and have railed against a perception that state employees retire with fat pensions.

Spokesman Anders Lindall said the group is "very concerned" about Friday's development. He renewed a call for a summit meeting this month to deliberate solutions as "the only path to a fair and constitutional solution, not a headlong rush to pass legislation that only hurts workers and retirees."

But Republican leaders embraced the possibility of breaking through the impasse.

"Successful pension reform is not dependent on a cost shift (to the schools)," said House Republican leader Tom Cross. "We've always said it's a separate issue."

Republican Rep. Darlene Senger, who met with Quinn on Friday to discuss the issue, said that with the cost shift out of the picture, "this is moving in a really significant direction."

"Now we're talking about, 'Let's stick with the real issue and the real issue is getting our pensions sustainable for the long term for everyone,'" she said.

Decades of inattention to saving up for state workers' retirement plans, including years where legislatures and governors skipped payments, means the state's five pension accounts are short $96 billion.

Various plans floated in the last year have included bumped-up contributions and less-generous returns for current employees, which raised Cullerton's constitutionality questions. His spokeswoman said Cullerton is willing to negotiate a separate deal addressing the local-government share of pension costs.

The House convenes Sunday with plans to work until Wednesday morning. The Senate adjourned abruptly Thursday night but Cullerton cautioned senators to be ready for a call to return Tuesday if action is needed on any legislation.